RE:RE:RE:Lesailesduquebec - Bombardier - sentier- étroitI agree on both counts.
They should get rid of the higher interest rate JB bonds of 2025 and 2027. But the only problem I foresee is that these Bond Holders are too far away 4years and 6 years. Why would the JB Holders agree to give up such high interest bearing bonds at 8.75% up (BTW is that correct 8.75%)? The only way Bombardier can get rid of those is to pay the penalties.
If what you say is correct and i have no reason to doubt it. Then my suggestion would be to renegotiate the first one coming up in 2021 by only using only $500M to pay off a smaller portion for now, and then renegotiating the $1.3B remaining right now for 5.5%. This method will show that they can pay off debt when needed and establish the 5.5% lower rate to JB Holders.Then pay the penalty whatever it is to get rid of those other high interest JB's for 2025 and 2027. They just signed those didn't they, so they'll carry the highest discharge penalties. But i think if they can get the 5.5% rate? It's a no brainer.
Hopefully the 2021 and 2022 JB's are held by different HEDGE FUNDS. So you can use one Hedge Fund to get rid of the high interest Hedge fund.
What ever the case? Bombardier should hire a couple of shrewd Financial advisers to start the process ASAP.
This is more important right now than anything they have to deal with. Only Bombardier knows what those penalties in those debt's they signed say. Only they know what those Shylock Hedge Funds are negotiating with them.
This process of renegotiating these debt's look to me to be a little tricky but they aren't as hard as people think. The dicision in selling BT was hard for the Family. So they have to use the BT cash wisely. They have no choice.
Jim99999 wrote: I would prefer them to redeem the 2025 and 2027's. Those two issues total $3.5B and cost $270M interest each year. BBD can not afford to be paying this amount for years to come.
The debt that is due in the near term is less expensive. Of the ~$5.2B that is due before 2024, about $1B is at 8.75%, the rest is at 6.125% or lower.
I am hopeful that they can continue to use the $1B credit facility, and get an additional $2B at somewhere around 5%. With that they could roll over the near term debt and attack the expensive longer term debt with the $3.6B from Alstom. This would leave them with annual interest expense of approx $385M. Don't really expect that is what will happen, though.
Jim
BBDB859 wrote: Thanks for the article momo.
A potion of this article indicates that Bombardier has options in repaying the maturing JBD for 2021/22. IMHO this is the proper way to do it.
Here it is:
"Au total, la pandmie a cout 1,9 G $ Bombardier et cela se reflte dans son niveau d’endettement lev. En 2021, la compagnie devra rembourser 1,9 G $ et 1,4 G $ en 2022. La compagnie aura le choix de rembourser 100 % de ces deux prts ou d’en refinancer une partie si elle le dsire. La dcision dpendra des taux d’intrt qu’elle sera en mesure de ngocier. Mais au bout du compte, sa dette doit obligatoirement baisser.
Faire baisser la dette en 2021 implique que l’avionneur russisse contrler ses cots maintenant. Bombardier voit devoir contrler ses procds d’assemblage comme jamais elle ne l’a fait au paravent. "
This is the way I'm advocating to decrease the Debt. They should pay $1.4B of the $1.9B of 2021. If they can refinance $500M of that at 5.5% then they reduce the total interest of that $1.9B debt to $27.5M. Savings of $120M yearly
The next 2022 is $1.4B. Pay $1B and refinance the $400M at 5.5%. Easily done because now the JB holders have given this 5.5% interest rate in 2021 to Bombardier already. The total interest payment for the $1.4B is reduced to 22M. Savings of $86M yearly.
By doing it this way, the Bomber has cash left over of $900M from those 2 JBD payments they paid off in 2021/2. They've reduce the interest on the debt from $255M yearly for 2021/2 to $50M yearly for 2021/2. Now for sure they have the money $900M, for 2023 maturity of the other JBD, and can reduce that rate to 5.5%.
To me this is the way to go. Because they don't have to cash in the shares from Alstom for 3 years, and they'll have $1.8B of Cash on hand all the time, from now till 2024. Plus you have the option of using some of that Cash on hand for reducing debt if need some extra money that JB holders may want.
This formula only works if the Junk Bond holders are willing to give lower interest rates for the $500M/2021 and $400M/2022. If they don't give you 5.5% interest, then discharge the whole thing, and find some other JB holder that will give you 5.55% now. It can't be that hard to do with interest rates at near 0% now.